Inflation: Myth or Reality?

Within the last couple of months, the Federal Reserve has undertaken drastic measures to help support the commercial paper market – essentially allowing banks to float illiquid commercial paper. Whether the Federal Reserve is supporting the Treasury debt auctions has yet to be seen or proven, however, I am looking for signs that M1 and M2 money supplies have stabilized before I assume that inflation is going to get out of control. If for some reason we can drastically increase the productive capacity of the U.S. economy, maybe some of the money supply expansion and federal / fiscal actions may actually have a positive impact in the long term (inflation prohibitive).

In case you forgot your economics 101 book at home you can look up the money supply indicators on wikipedia. Note: M3 indicators are no longer disclosed by the Federal Reserve

I recently came across a video by Ron Paul, I believe from last Tuesday during the Fed meeting with the Fed Hearing Committee. I understand his reproach; however, gold as a fixed asset does not provide the expansive flexibility of a fiat system we have now. Mr. Paul is relatively tasteful and logical in his arguments although I do not entirely agree with some of his ideals.

Inflation is a real risk, as I have said previously, I intend to start focusing on commodity prices, treasury yields, and money supply to support my notion of an economic turnaround. Simultaneously, I intend to start moving a substantial portion of my portfolio from U.S. securities to the Middle East and Asia (China is overpriced at an average P/E of 32+) as a form of inflation / currency hedge. I am convinced that the federal reserve is going to have a difficult time raising interest rates as aggressively as I believe they should to curb hyperinflation. The reactive nature of our largest institutions inhibit them as acting as decisively as a non-institutional market participant, so with that, I encourage everyone to protect themselves.

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